Blacklisting is impermissible for ordinary contractual breaches absent demonstrable public-interest necessity.

The petitioner was awarded a contract for supplying and installing an automatic sensor-based vehicle speed regulatory system at six animal-corridor sections on NH-37 in Kaziranga National Park for ₹15,98,13,576, pursuant to a work order dated 9 January 2019 and contract agreement dated 25 January 2019.

During execution, the petitioner deposited an amount claimed by the respondents to be ₹9,40,000 short of the amount intended to be refunded. Upon being notified, the petitioner paid the differential amount of ₹9,40,000 and an additional penalty/interest of ₹2,53,800.

The work was completed and handed over on 21 December 2020, while final payment was made on 28 March 2022.

Thereafter, the respondents issued a show-cause notice dated 27 December 2022 proposing to place the petitioner and the original equipment manufacturer in the Department’s Negative List.

By order dated 21 February 2023, both were placed in the Negative List for five years. The petitioner challenged that order under Article 226 of the Constitution.

Whether the respondents were justified in initiating blacklisting/Negative List proceedings against the petitioner after completion of the contract, acceptance of the work and payments, particularly in respect of the subsequently rectified short deposit.

Whether the alleged failure to provide follow-up action and to extend the performance bank guarantee constituted reasonable and rational grounds for blacklisting the petitioner.

Whether the Negative List order could be sustained against the original equipment manufacturer, which had not been independently put to notice and against whom no specific allegations were made.

The Court applied the principles governing blacklisting and debarment in public contracts, namely that blacklisting is a drastic measure carrying serious civil and commercial consequences and must therefore be supported by cogent reasons, bear a rational relationship to the alleged misconduct, and satisfy proportionality requirements.

Relying on Blue Dreamz Advertising Private Limited v. Kolkata Municipal Corporation, (2024) 15 SCC 264, the Court held that blacklisting should ordinarily be reserved for cases involving irresponsible, dishonest or seriously non-performing contractors where debarment is necessary to protect the public interest; it should not be imposed for an ordinary contractual breach accompanied by a bona fide dispute.

Relying also on Techno Prints v. Chhattisgarh Textbook Corporation, 2025 SCC OnLine SC 343, the Court held that the authority must apply these principles even before issuing a show-cause notice; where blacklisting is plainly unwarranted, issuing such notice would amount to an empty formality.

The exercise of blacklisting power must further be fair, reasonable and non-arbitrary under public law.

The Court found that the petitioner’s short deposit was an isolated and rectified financial discrepancy. The petitioner paid the differential amount and the respondents accepted both the amount and the 18% penalty, thereby substantially settling that transgression; blacklisting on that basis was consequently unreasonable.

The allegation concerning lack of follow-up action was unsupported by any reference in the show-cause notice or impugned order to defects, warranty complaints or communications requiring further work after completion and handover.

Similarly, the objection regarding non-extension of the performance bank guarantee was raised only after the contract had been completed and payments had been made, and had not been raised contemporaneously; the Court considered the belated reliance on that ground to exhibit legal malice and irrationality.

Applying the proportionality and public-interest principles in Blue Dreamz Advertising and Techno Prints, the Court held that the alleged breaches did not justify even initiating, much less concluding, blacklisting proceedings.

As regards the original equipment manufacturer, the Court held that the order could not stand because it had not been given notice and the allegations did not specifically concern it.

It quashed and set aside the Negative List/blacklisting order dated 21 February 2023 against the petitioner.

It also set aside the order insofar as it affected the original equipment manufacturer, since the manufacturer had not been put to notice and no specific misconduct was attributed to it.

The interim order was vacated and the writ petition was disposed of without costs.